Debt is always the elephant in the room that nobody wants to talk about because nearly everyone has it, but most people feel too embarrassed to discuss it. Usually the largest source of debt is credit cards that have been used unchecked and haven’t been paid down properly. But it may also be from using loans for things you weren’t really able to afford such as a newer car or a nicer home. Debt that builds up too high can lead to dealing with creditor calls, having a lot of financial and personal stress that can affect you and your relationships, so you should always look to get it paid off as soon as possible. But what is the right way to do it?
Create A Systematic Plan Attacking The Smallest Debt First
Often the question on debt when you owe to multiple creditors is how to get started and whether you should start with the creditor who you owe the most to. As Time Magazine explains, the kind of debt you should tackle first is the one that’s carrying the highest interest rates such as credit cards that have bought high priced items or other regular bills that add up. Sometimes it helps if you’re making some payments that are currently too high to work out a new schedule with your creditor. But try to eliminate other bills in the meantime if you can either by selling items or cancelling subscriptions.
Be Careful What Kind Of Loans You Use To Consolidate Debt With
Usually trying to work on a payment plan with your creditors is the best way to go after bad debt you owe, but sometimes you may be unable to do that. In these cases, you may want to use a personal loan for debt consolidation which can work but may not be right for everyone. You want to be able to use a debt consolidation loan that comes with low interest rates and affordable installment plans, and you should never attempt to use short-term high interest predatory loans like payday loans or auto title loans as consolidation tools. Unsecured debt consolidation loans usually have strict credit score requirements and hard qualifications from banks, but sometimes marketplace and peer to peer lending groups have easier requirements for them. You may have an easier time using a home equity loan or line of credit if unsecured loans or lines of credit are not an option.
Credit Counseling And Bankruptcy
If your in extremely deep debt and need a little help getting out, a credit counseling and debt management plan may be in order or even bankruptcy filing. Some states even have requirements that you seek help from a credit counseling center before making any bankruptcy filings. Keep in mind that there is a broad spectrum of so called debt counsellors and that debt management is not debt settlement. Usually if you go with a credit counseling agency that is relatively inexpensive and focuses more on educating and advising you with debt payments than it is on paying them commissions and monthly fees then you’ll be more likely to succeed in debt elimination. You can also find debt relief from filing for the right bankruptcy, but if you have to go this route make sure you consult an experienced attorney.